Why Most Startups fail in Nigeria: Failures of businesses are not unusual anywhere in the world. The most startling finding, though, is that tiny and startup companies are more likely than large corporations to experience this issue. Numerous data regarding the survival and failure rates of small firms are available. Nigeria is home to a remarkably high number of small-scale enterprises, yet despite SMEs’ important role in the country’s economy and growth, the number of short-lived enterprises in Nigeria is concerning. It’s critical that you comprehend the potential causes of small business or startup failure in Nigeria. You will learn from this article what not to do when you pursue entrepreneurship.
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Top 14 Reasons Why Most Startups fail in Nigeria
1. Copying Other Businesses: If small enterprises consistently mimic the actions of their competitors, they will inevitably fail. A company must exhibit uniqueness and refrain from making crucial judgments based solely on the actions of others.
Attempting to copy other companies without conducting appropriate consultations can often backfire, especially if the goal is to be successful or increase sales.
2. Poor Customer Care/Support: When clients don’t feel valued or well-treated, they frequently grow irate, write negative reviews, and shop at other places. Poor customer service will cause small businesses to lose a lot of clients and potential clients, which will force them to naturally die. Customers leave a company for one where they feel unnecessary in favor of one where they are treated with consideration and value.
3. Mismanagement of Funds: When there is little accountability and the owners mismanage the company’s finances, several small enterprises fail. These companies don’t keep track of their sales or how they spend their money. Some entrepreneurs even utilize their profits for meeting their own or their families’ needs. When funds intended for business are spent on non-business expenses, what do you expect? Such a firm will eventually fail.
4. Inability to Manage Changes that Come with Growth: Some small enterprises develop exponentially in a short amount of time. These small firms typically face additional difficulties as a result of their growth. These difficulties include modifications to technology, resource usage, billing, and funding.
Sadly, a firm will fail if it cannot overcome the difficulties brought on by its expansion. For instance, after growing rapidly, GoMyWay and Efritin failed within 16 months due to their inability to raise the capital needed to continue operating.
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5. Lack of Market Demand: In Nigeria, a lot of small and startup firms fail due to a lack of market demand for their goods or services. Because of this, it’s critical for any firm to make sure that it is concentrated on offering specific goods or services that are in demand and have a market. Among the Nigerian businesses that perished as a result of this issue were Easy Taxi, Camplus, and 9jabookings.
6. Inadequate Financing: Another significant factor contributing to the closure of many small enterprises in Nigeria is inadequate or nonexistent funding. Starting a firm without sufficient operating capital is a common mistake made by a large number of entrepreneurs. Because of this, the majority of business owners will become demoralized and opt to shut down.
7. Poor Business Management: When a company is run badly, it will soon fail. Planning, organizing, staffing, directing, inspiring, controlling, co-coordinating, and communicating are some of the tasks that make up management. Furthermore, the cornerstone of small business management is always being aware of where your company stands. That being said, underperforming small enterprises will eventually fail.
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8. No Planning: As the phrase goes, “if you don’t plan, you’ve planned to fail.”This explains why a few Nigerian small enterprises fail. It’s funny that someone would launch a company without having a solid business plan. There’s no clear-cut, practical business plan in place. Such a business has a significant probability of failing. A business plan is a detailed road map that outlines the past, present, and future directions of a company.
9. Failure to Understand their Market and Customers: Nigeria is a complicated nation, and anyone hoping to conduct business there needs to be aware of the fierce competition in the market as well as the purchasing patterns of the populace. A few tiny companies that don’t succeed don’t know who their clients and markets are. They are ignorant of the identities of their clients and the spending power of those clients.
10. Inaccurate Expectations: A lot of new and tiny company owners assume that after doing very little to nothing, money will magically appear in their account. They don’t seem to understand that creating prosperous enterprises in Nigeria is like competing in a protracted race that requires patience, commitment, and a lot of work before the rewards are realized. Many Nigerian enterprises have failed quickly due to the premise of beginning a business with unrealistic expectations and impatience.
11. Reactive Attitudes: Many companies in Nigeria have failed as a result of managers’ or decision-makers’ inability to adapt to changes in the market, competition, and/or technology. Small firms will fail and lose relevance in their individual industries if they are unwilling to adapt and stay inventive.
12. Lack of Focus: Almost simultaneous investments in multiple projects are detrimental to a corporation. Your attention must be on the quality, delivery, and follow-up of your products if you want to provide excellent customer service. Because the owners began projects outside the scope of their business plans, some small enterprises would run out of money and lose money. They will ultimately have to shut down operations. Sometimes it’s best to turn down additional projects (new goods or services) so that you may concentrate on quality rather than quantity.
13. Inability to Communicate Value: In Nigeria, a number of small businesses fail due to a lack of clarity in defining their value propositions, which essentially means that they are unable to comprehend and effectively express their offerings to customers. Because there is no correlation between the value these companies offer and what the market requires, these enterprises will fail.
14. Disregard for competition: You are putting your startup in danger if you don’t take competition into account. Some businesses only seek to copy what the competition is doing, without adding anything new to the mix. This has typically proved to be devastating for startups and small companies. Because customers have such significant negotiating power, you shouldn’t let a highly competitive climate prevent you from differentiating your goods and services.
In conclusion, It’s not easy to launch and maintain a successful firm, and a company’s owner plays a crucial part in its success. One should never consider failure to be an option. You’re therefore headed in the correct direction if you can successfully manage your firm around those 14 primary problems and maintain the necessary drive, determination, and mindset.
Hello there! I’m Fanu Omolade, a digital enthusiast, sociologist, and guide on the path to financial well-being and empowerment. I’m thrilled to welcome you to a space dedicated to not only unraveling the complexities of personal finance but also exploring the intersections of digital enthusiasm and sociological insight.
